Using self-discipline to change your money habits will not work as well as another approach.

There is growing evidence that playing to our strengths leads to greater success and happiness than trying to compensate for our weaknesses.

You may recall that last weekend’s post underscored the need for the rational part of our brain and our instinctual side to work well together, if we want to achieve long term success in changing our money habits. Another way of saying it is: don’t over-rely on your rational side (“I can’t afford this”) to constantly whip your instinctual side (“but I want it”) into submission. Why? Because sooner or later your instinctual side will rebel and your rational side will fatigue and out will come your credit card.

The strategy of using will power is also weakness-based. It focusses attention on the undesirable behaviour. An unintended consequence can also be a hit on our self esteem: I’m someone who can’t resist a sale or I am someone who can’t say no to anyone.

Are you ready to get hardcore with me?

Here’s an alternative approach. Clearly define your strengths (with the help of others – more on that shortly), root yourself deeply into a composite of your strengths, and bring them to play vis a vis your money habits.

On Saturday, I’ll provide an exercise to help you do just that.

What do you already have in your life that you appreciate? The art of contentment is just this: learning to derive satisfaction from that which we already have.

Monday posts will be a personal praxis of contentment.
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Don’t you love the feeling of sleeping in a cool room with just the right weight and warmth of a quality blanket? Yellowknife of all places is good-blanket worthy! This pure wool blanket was made in Canada by the MacAusland Woollen Mills in PEI. This family-owned business has been making blankets since 1932! Thanks to The Old Faithful Shop for introducing me. And as you can see by the last photo, a little friend also fully appreciates it too (and I indulge him).

Does this story sound familiar?

Amanda was determined to spend more responsibly, and especially to stop using her credit card so much. Time and again, she set a firm plan, and over the coming weeks, sometimes even managing for months, she would seriously curb her spending. But inevitably, one day she would succumb to an irresistible temptation and feel like she had ended up right back where she started. Most often things went something like this: Amanda would turn down invitations out for lunch, she would walk on past John Fleuvog’s on Queen Street, and she would content herself with dvd’s at home (after all, hadn’t she bought the Blu-Ray in order to do precisely that?). Then one day when she was perhaps a little tired, or maybe lonely, she would finally say Yes, and out would come the credit card. And having finally broken the strict regimen, she would then go the distance – go out for lunch with friends, then pop into the nearby shop and top it off with late afternoon drinks. $300 gone.

There was always an immediate rush of gratification, but pretty quickly discouragement would set in.
“I’m in debt. Again”. And then she would blame herself. “I have no self-discipline!”.

Chip and Dan Heath, in their latest book “Switch: How to change things when change is hard” have a useful lens through which to understand what just happened.

We are not a sane species! In fact, we are downright schizophrenic. Our minds have two systems at work at the same time, all the time.
One part of our brain is rational. This is the part of us capable of long-term planning, analysis and delayed gratification for the greater good.
The other part of our brain is instinctive. It is, every moment, acutely aware of whether we are experiencing pain or pleasure.
Our rational side provides us with direction. Our instinctive side provides us the energy to get things done. When these two parts of our brain work together, change happens. But when our rational mind is at odds with our instinctive mind, the rational mind will lose. Every time.

When Amanda was faced with a strong enough temptation that put her instinctive, short-term mind into conflict with her rational mind she pulled out her credit card.

This does not mean she is un-self-disciplined.
It does not mean she has an unconscious desire to sabotage herself.
It does not mean she is lousy with money.

She simply found herself in a situation that put her two systems in conflict.

This is the first thing you need to know about changing your money habits. Long-term success requires an awareness of these two parts of your brain, and finding ways to work with both the rational and the instinctive parts. Over the coming mid-week and weekends, I’ll be posting on how to do precisely this.

The legendary Peter of Peter’s Useful Crap first put me onto this: Wind Mobile is offering some truly low-priced options. I don’t know if the $20/month unlimited Canada-wide calling and texting is still available, but even if not, the $40/month deal they’ve extended til Jan 16th looks impressive. Surprisingly they don’t provide coverage in Yellowknife, so I’m outta luck. But still, I’m happy for all you folks out there.

I do my own investing. And I remain convinced I’ve done pretty darn well. It isn’t rocket science.
I started with a couple basic economic courses, then over the years have learned to read the financial pages.

Care to join me and become savvy about the world of high finance?

Thursdays are in-the-know days here on my blog, in which I’ll link to a handful of the current week’s articles I found interesting.

This week:

1. An OpEd in the New York Times:
“Seriously, what we’re looking at over the next few years, even with pretty good growth, are unemployment rates that not long ago would have been considered catastrophic — because they are. Behind those dry statistics lies a vast landscape of suffering and broken dreams. And the arithmetic says that the suffering will continue as far as the eye can see.”
The columnist argues for a repeat of the New Deal, ie. the government should employ folks to work on infrastructure. Doing so will create jobs, which in turn will create economic growth.

2. How much Cdn CEOs made during 2009. For example, Jim Shaw (think Cable company) made $11,557,119.

3. And the BBC did a nifty 90 second explanation of GDP. Worth knowing!